The Central Bank of Nigeria’s (CBN) governor, Godwin Emefiele, said the pan-African payment and settlement system (PAPSS) will ease cross-border transactions and minimize the use of third currencies in intra-African trade.
For cross-border transactions in Africa, the third currencies are dollars, pounds, and euros.
Emefiele made the remarks on Thursday at the opening of PAPSS in Accra, Ghana.
The platform for commercial use was officially introduced by the Africa Export-Import Bank (Afreximbank) in partnership with the African Union (AU) and the African Continental Free Trade Area (AfCFTA).
Speaking at the ceremony, Emefiele stated that the launch of PAPPS is a watershed moment in the joint endeavor to develop an infrastructure that improves payment gateways across West Africa.
He went on to say that the platform would help households, enterprises, and financial institutions, as well as formalize trading operations that are not reflected in official trade data.
“For example, businesses can be assured of an efficient and reliable payment gateway that supports the instant flow of funds and relatively the use of safe payment channels, which usually comes at a high cost to households and businesses,” Emefiele explained.
“Prior to the launch of PAPSS, intra-Africa trade settlements required a third currency and a non-African correspondent bank.” This led in an estimated annual loss of close to $5 billion and harmed trade in African countries.
“The launch of PAPPS provides the African continent with new opportunities and aspirations.” It will simplify cross-border transactions, reduce the use of third currencies for intra-African transactions, eliminate the requirement for correspondent banks, and greatly increase intra-African trade.”
“As payments and settlements are resolved, intra-African trade is expected to increase to 35 percent of total trade from 15 percent in five years with infrastructure provided by PAPSS.”
“With the increasing rate of digitisation in financial services hastened by the onset of the COVID-19 pandemic, PAPSS can serve as a viable platform for supporting e-commerce in Africa.”
Nigeria is delighted by the potential of PAPSS, according to the CBN governor, and “that is why we participated actively in the program, and we have put our best efforts to ensure the payment platform’s realization.”
CBN, according to Emefiele, would continue to facilitate the general adoption, acceptance, and implementation of PAPSS.
“The CBN will ensure that the financial institutions under its jurisdiction accept PAPSS and will recommend it to businesses throughout Nigeria,” he said.
According to Mike Ogbalu, chief executive officer of PAPSS, the platform is a plan for the continent’s journey toward self-sufficiency, thereby bridging the gap in sharing boundaries and wealth, as well as a tool for upgrading payments systems and infrastructure.
“A clear shared vision and unity of purpose serve as our guiding light on this journey.” But, like with any journey, crucial infrastructure is required to advance the fundamental pieces that will underlie a flourishing continent,” Ogalu said.
“Governments, businesses, and individuals consume goods and services in exchange for value.” Payments are the primary way by which value is exchanged or traded.
“The more efficient our payment systems are, the higher the velocity of value exchange and, as a result, the higher the volume and value of trade and, as a result, our subsequent prosperity.”
Wamkele Mene, secretary-general of AfCFTA, praised the success of the pan-African payment and settlement system, saying it will allow Africa to minimize dependency on foreign currencies and enhance intra-Africa commerce.
PAPSS is a cross-border financial market infrastructure that enables payment transactions throughout Africa, addressing trade barriers in a continent with over 41 known currencies.